12 July 2013 9:47 PM

Saturday PS: The economics of somewhere else

ON January 4 1642, Charles I turned up in Parliament to arrest five MPs whom he believed to be plotting against him. Forewarned, they had very sensibly high-tailed it prior to the King's arrival.

The monarch's six-word reaction was to become famous: 'I see the birds have flown.'

This quotation comes to mind whenever I contemplate what I think of as 'the elsewhere effect'. Put simply, I suspect a very large amount of economic activity is happening out of sight, and no I am not talking about the black economy, tax evasion, moonlighting or working while claiming benefits, although there is plenty of these sorts of things going on as well and they do overlap with the phenomenon I mention.

Regulation, legal prohibitions, the impossibility of getting insurance cover, the dangers of litigation - all these and allied developments have, I would guess, simply displaced activities to a place beyond their reach.

Here are some examples. The smoking ban seems to have coincided with a boom in 'pop-up restaurants', often in private homes. There's a surprise. The treatment of open solicitations for investment in private companies as comparable with the marketing of shares and unit trusts has been accompanied by increasing emphasis on 'business angels', some of them on television.

Corporate governance requirements and other regulations have reduced the attractiveness of the limited-company model in comparison with partnerships or syndicates of individuals.

What this all adds up to is, as I have noted before, what Professor Ian Angell of the London School of Economics has called a shift from 'communities of law' to 'communities of trust', from open economic activity among people who do not need to know each other to closed-circuit activity among tightly-knit groups of people who are very well acquainted.

1) Existence and non-existence

THIS 'elsewhere' principle applies well beyond economics. Would you be surprised to learn that the 'real' secret services are not the bureaucratised, equal-opportunities, office-block dwelling organisations with which we have become familiar since the end of the Cold War but shadowy outfits that, like MI5 and MI6 in the old days, officially do not exist? I wouldn't.

Nor would I be shocked to learn that British Ministers were increasingly relying on mercenaries to carry out bespoke military operations abroad rather than risk being sued by their own regular troops should something go wrong.

I don't believe important decisions are made at meetings of David Cameron's ludicrously unwieldy Cabinet, nor at 'scoping discussions' (or whatever is the vogue phrase) of civil servants.

And no, I don't believe any truly vital official information is entrusted to any publicly-available document.

2) The plausible young men (continued)

I had been going to write that the notion of the 'elsewhere effect' would be anathema to Ed Miliband, the Opposition leader. In his policy-wonk world, laws are passed and everyone complies. If the law says that Cabinet meetings should be televised, for example, so be it - there is no effect on the behaviour of the participants.

Ditto everything else, from smoking bans to money-laundering regulations. But why pick on him? Miliband is simply one of a gaggle of plausible young men (Cameron, Clegg, Osborne etc) who think much the same way. Along with a touching faith in administrative solutions to society's ills, they cling with grim determination to the Tony Blair formula that tried to close down discussion of matters of principle by insisting that 'nobody' was interested, and that 'real people' wanted politicians instead to empathise with the mundane problems of life.

Hence Cameron talking to his party conference in October 2006: 'While parents worried about childcare, getting the kids to school, balancing work and family life - we were banging on about Europe.'

For a start, 'getting the kids to school' is not something with which politicians can be of much help, 'balancing work and family life' is susceptible to political intervention only by either increasing business costs or worsening the work experience of those without families, and politicians' soothing of worries about childcare is a matter of getting non-parents to subsidise parents.

3) The day before yesterday

I caught up with my old friend Alwyn Turner earlier this week and we chatted about his new book A Classless Society: Britain in the 1990s, to be published by Aurum later this year.

It occurred to me afterwards that memory plays tricks and that a lot of people will 'recall' the Nineties as I initially did, as a time of gadgetry, Britpop, Britart, Tony Blair (landslide victory), the Millennium Bug, Tony Blair (response to the death of Princess Diana), the Millennium Dome....that's it.

In fact, of course, Blair was a phenomenon of the second half of the decade and his election was within three years of its end. The dominant British political figure was John Major (now Sir John), who served as Prime Minister from 1990 to 1997.

Similarly, the gadgetry was a late-Nineties feature - mobile phones were relatively expensive throughout the decade, and most people managed without e-mail for most of the Nineties.

It was a time of successful wars (in contrast to today): the Gulf War, Bosnia, Kosovo. A time also of scorching summers - 1990, 1995, 1997. Economic crises were far away, in places such as Thailand and South Korea. Everyone, we were told, agreed about everything: free trade, privatisation, sound money.

Personal snapshots include sitting in a pub behind The Guardian on a sweltering night in August 1990 as a breathless colleague burst in and told us: 'You'd better come back to the office - the Yanks have gone into Saudi Arabia.'

Operation Desert Shield had started.

Then there was sitting in an estate agent's car on a drizzly day in April 1998 as I sought somewhere for us to live in the country. My wife and children had caringly de-camped on holiday to the Republic of Ireland leaving me with instructions to find a buyer for our London flat and a new family home. Amazingly I managed to do both.

Millennium Eve was low key; we made chilli and listened to Frank Sinatra. That was the end of the century, as The Ramones had put it, albeit somewhat prematurely.

One last Nineties memory: a Saturday evening in The Bloomsbury Tavern, watching the first ever National Lottery draw with none other than the author himself.

Thanks for reading and enjoy the weekend.

dan.atkinson@live.co.uk

Going South: Why Britain Will Have A Third World Economy By 2014, by Larry Elliott and Dan Atkinson is published by Palgrave Macmillan

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